SC13-1333 Third Amended Complaint - Supreme Court of …

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IN THE CIR CULT COURT OF THE 15" JUDICIA L CIRCUlT IN AND FOR

PALM BEACH COUNTY, FLORIDA

CASE NO. 502004 CA006138XXXXMB AO

STEWART TILGHMAN FOX &

BIANCH1, P.A., aprofessiona] association;

WILLIAM C. H EARON, P.A., a professiona]

association; and TODD S. ST EWART, P A.,

aprofessional association,

Plaintiffs,

-vs.

MARKS & FLE]SCHER, P.A., a pmfessiona] association, KANE & KANE, a Florida general par1nership; and LAURA M. WATSON, P.A. dib/a WATSON & LENTNER, a professional corporation; GARY H. MARKS, AMIR FLEISCHER,

CHARLES L KANE, HARLEYN. KANE, LAURA

M. W ATSON and DARIN J. LENTNER,

Defendants.

THIRD AMENDED COMPLAINT

The Plaintiffs, STEWART TILGHMAN FOX & BIANCH1, P.A., WILLIAM C.

HEARON, P.A., and TODD S. STEWART, P.A., sue the Defendants, MARKS & FLEISCHER,

P.A., KANE & KANE, and LAURA M. WATSON, P.A., d/b/a WATSON & LENTNER.

GARY H. MARKS, AMIR FLEISCHER, CHARLES J. KANE, HARLEY N. KANE, LAURA

M. W A TSON and DARIN J. L ENTNER.

l. This is an action for damages in excess of Fifteen Thousand Dollars (515,000.00)

exc lusive of interest and costs and for the imposition of a constructive trust.

Exhibit "A"

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2. The Plaintiff, STEWART TILGHMAN FOX & BIANCHI, P.A. ("STFB") is a professional association of attorneys practicing law in the State of Florida with its principal place of business being in Miami-Dade County, Florida.

3. The Plaintiff, TODD S. STEWART, P.A., is a professional association practicing law in the State of Florida with its principal place of business being in Palm Beach County, Florida.

4. The Plaintiff, WILLIAM C. HEARON, P.A., is a professional association practicing law in the State of Florida with its principal place of business being in Miami-Dade County, Florida.

5. The Defendant, MARKS & FLEISCHER, P.A., is a professional association practicing law in the State of Florida with its principal place of business being in Broward County, Florida.

6. The Defendant, KANE & KANE, is a Florida general partnership practicing law in the State of Florida with its principal place of business being in Palm Beach County, Florida. The Defendants, CHARLES J. KANE and HARLEY N. KANE are equal partners in said partnership.

7. The Defendant, LAURA M. WATSON, P.A., is a professional association doing business as WATSON & Lentner, and practicing law in the State of Florida with its principal place of business being in Broward County, Florida.

8. The Defendants, GARY H. MARKS, AMIR FLEISCHER, CHARLES J. KANE, HARLEY N. KANE, LAURA M. WATSON and DARIN J. LENTNER are attomeys at law

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licensed to practice law in Florida. The Defendants, CHARLES J. KANE and HARLEY N. KANE are residents of Palm Beach County, Florida. The Defendants, GARY MARKS, AMIR FLEISCHER, LAURA M. WATSON and DARIN LENTNER are residents of Broward County, Florida.

9. At all times material hereto, the defendants acted jointly, in conceit and as agents of one another concerning the matters alleged herein, and further ratified the wrongful acts of each other by, inter alia, knowingly acting together to achieve a secret settlement of all claims and accepting the benefits of said settlement as set forth below.

10. The law firm defendants, through their owners and attorneys, the individual defendants, represent approximately 440 healthcare providers who treated individuals who were insured under certain Progressive automobile insurance policies. Said healthcare providers had submitted bills for treatment to the Progressive insurance companies but the insurance companies had failed to pay the full amounts due. There were approximately 3,000 instances where the Progressive insurance companies had failed to pay the amounts due.

11. The failure of the Progressive insurance companies to pay the bills gave rise to a benefit claim by the healthcare providers for the amount that the Progressive insurance companies wrongfully failed to pay. Under Florida law the prevailing party in a benefit claim arising out of an insurance contract is also entitled to an award of attorneys' fees. The amounts involved in the individual benefit claims are such that the predominate part of the awards in the benefit claims would inure directly and solely to the defendants. Each of the law firm defendants

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had, at various rimes, sought to settle the benefit claims of their respective clients with the Progressive insurance companies without success.

12. The issues in the benefit claims were limited so that the healthcare providers were not entitled to discover the means and methodologies by which the Progressive insurance companies reduced the healthcare provider bills or whether the Progressive insurance companies were engaging in any improper conduct.

13. In 2001, the defendants engaged the firm of Slawson, Cunningham, Whalen & Stewart to institute a bad faith action against the Progressive insurance companies. Suit was filed in the Circuit Court of the 15?' Judicial Circuit In and For Palm Beach County, Florida. Drs. Fishman & Stashak, M.D.'s. P.A. et al. v. The Progressive Corporation, et al., Case No. CA 01 11649 AB. In early 2002, the defendants engaged the plaintiffs to take over that litigation. Plaintiffs formally filed their notices of appearance and substituted as counsel of record on behalf of the healthcare provider plaintiffs in February and August 2002.

14. To induce the plaintiffs to take over the Fishman & Stashak case, defendants falsely represented to the Plaintiffs that all of the client healthcare providers were upset with the way they had been treated by Progressive insurance companies and wanted to pursue bad faith actions against the Progressive insurance companies and that defendants themselves wanted to pursue the bad faith claims against Progressive. Defendants never disclosed that their true intent was to use plaintiffs' expertise and efforts in the bad faith case to force a settlement of the benefit claims, and to sacrifice the former to achieve the latter when and if the need arose, Defendants further informed plaintiffs that they had authority to act on behalf of their clients and control of

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both the benefit and bad faith claims. These representations, and the circumstances made to appear by defendants' omissions were material to Plaintiffs undertaking and were relied on by Plaintiffs

15. At the time that plaintiffs were engaged to take over the bad faith action, plaintiffs and defendants agreed: to jointly develop and implement strategies to advance both the benefit and bad faith claims of all healthcare providers; that defendants would act to "perfect" the bad faith claims and make the client healthcare providers available for bad faith claims; that plaintiffs would prosecute bad faith claims not only on behalf of the then-named plaintiffs, but on behalf of the defendants' other clients whose bad faith claims were being perfected; that negotiations with Progressive on any bad faith claims would be handled by the plaintiffs; and that plaintiffs' fee would be based upon settlement of the universe of bad faith claims or upon the judgment in the bad faith case. The relationship thus created between the plaintiffs and the defendants in the prosecution of the claims of the healthcare providers was that ofjoint venturers which created a fiduciary relationship between plaintiffs and defendants pursuant to which each owed the other the utmost good faith, faimess and honesty. Pursuant to that fiduciary relationship between the plaintiffs and the defendant, plaintiffs specifically placed trust in defendants and the defendants accepted that trust.

16. From January 2002 through May 2004, plaintiffs prosecuted the bad faith claims including but not limited to filing amended complaints, initiating and responding to discovery requests, and filing memoranda and briefs in both the trial and appellate courts. The work was voluminous and time consuming and advanced the rights of the named plaintiffs in the above bad

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faith case as well as the present and future bad faith claims of all healthcare providers. Plaintiffs' efforts resulted in rulings on May 19, 2003 and August 12, 2003 that the Progressive insurance companies had to produce a large number of intemal documents that, it is believed, will conclusively establish Progressive's bad faith and the healthcare providers' entitlement to an award of punitive damages. The Progressive msurance compames appealed those rulings and, on December 5, 2003, the District Court of Appeal, Fourth District, denied the Progressive insurance companies' petition for certiorari. The Progressive Corporation, et al vs. Drs. Fishman & Stashak, MD., P.A., et al., Case No. 4D03-3551. The District Court of Appeal denied Petitions for Rehearing and for Rehearing En Banc on January 20, 2004.

17. The ruling of the District Court of Appeal, Fourth District, created an opportunity to initiate settlement discussions with the Progressive insurance companies. Plaintiffs devised a plan whereby the plaintiffs would negotiate to settle all of the claims that the healthcare providers had against the Progressive insurance companies, beginning first with the bad faith claims and then proceeding to the benefit claims. Defendants agreed to the plan and authorized plaintiffs to negotiate on behalf of the defendants, to settle the benefit claims and provided plaintiffs with parameters for settlement. At this point, defendants again represented that plaintiffs would be acting on behalf of all of defendants' clients and that their fee would be based upon settlement of all of the bad faith claims, not just those of the named plaintiffs in the pending case.

18. Settlement discussions continued through April 2004. The Progressive insurance companies made substantial offers for a settlement of all of the bad faith claims. Defendants

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Complaint

Page 7 of 16

were advised and informed of those offers and negotiations. No settlement, however, was reached and plaintiffs demanded production of the internal Progressive documents which were due under the prior court orders. When the Progressive insurance companies failed to produce the documents, plaintiffs filed a Motion to Compel and for Sanctions. That motion was set for hearing on May 6, 2004.

19, In early May 2004, acting secretly and for their own interests, defendants undertook settlement discussions with the Progressive insurance companies. They did not advise or inform plaintiffs of said discussions. At the time, defendants were aware that, as a result of plaintiffs' efforts, the Progressive insurance companies faced imminent sanctions for refusing productions.

20. On or about May 18, 2004 it appears that the defendants, acting to seize and capitalize on information they obtained from plaintiffs' settlement discussions with Progressive insurance companies and to convert an opportunity of the joint venture to their own personal gain, secretly negotiated a settlement with the Progressive insurance companies. The settlement, jointly and indivisibly, included both the benefit claims and all bad faith claims. Following the settlement, the Defendants unilaterally assigned all of the settlement proceeds to the benefit claims so that the predominate part of the settlement would inure solely and directly to the defendants and plaintiffs' rights to attorney fees would be eliminated. Subsequently, on June 16, 2004, in a further effort to create circumstances to limit plaintiffs' rights, defendants sought and obtained the Progressive insurance companies agreement to execute an amended settlement agreement in which the defendants reallocated the settlement proceeds to assign an arbitrary and

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Complaint Page 8 of 16

unreasonable sum to the Fishman & Stashak case. The balance of the original settlement remained, jointly and indivisibly, assigned to both the benefit claims and the bad faith claims of all the other clients. Following the amended settlement agreement, Defendants once again unilaterally assigned all of the remaining settlement proceeds to the benefit claims so as to continue to benefit themselves and deny plaintiffs any attorney fees.

21. In secretly settling the bad faith claims of all healthcare providers and unilaterally assigning settlement proceeds to the benefit claims, defendants acted in bad faith, contrary to the fiduciary duties owed to the plaintiffs and for the unjust enrichment of their own financial gain at the expense of the plaintiffs and their healthcare provider clients. To gain approval of the settlement from the healthcare provider clients, defendants misrepresented the facts by providing false and incomplete information. Defendants further acted to terminate plaintiffs services by making it a condition for the healthcare providers to obtain the settlement proceeds and defendants then disbursed the majority of the attorney fees to themselves, notwithstanding The Florida Bar Rules governing trust accounts and plaintiffs' claim to the attorney fees.

COUNT I

BREACH OF FIDUCIARY DUTY

22. Plaintiffs hereby reallege paragraphs 1 though 21 as if specifically set forth. 23. At all times material and as is more fully alleged in the preceding paragraphs, plaintiffs and defendants were engaged in joint venture to pursue bad faith and other claims against the Progressive insurance companies, which included both litigation and settlement activities. As such, plaintiffs and defendants as joint venturers agreed to combine their efforts, time and expenses for this professional engagement.

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